Vanguard Australian Shares Index Fund (ASX VAS) is a listed Exchange Traded Fund on the ASX. Index Funds are market tracking funds. The common idea everyone have of investing is professionals picking stocks that they think will outperform the market. There is a large body of research which shows that a large portion of active funds does not beat market after fees.
Passive index funds aim not to beat the market but just track the major market indices such as the largest 200 Australian companies (ASX 200) or the broader market which includes all listed companies, All Ords.
First we have to declare we are not paid by Vanguard and are not compensated in anyway by Vanguard for writing this post. Even though we actively manage our own investment portfolio (sometimes borderline trading rather investing). We just think that low cost passive funds should be the default fund for a large portion of the population.
Vanguard Australian Shares Index
VAS share price track the changes in the S&P ASX 300. The ASX 300 is the an index which includes the 300 largest companies listed on the Australian Stock Exchange.
It is a liquid fund with around $1.5 billion in asset under management in the listed fund since 2009. Its unlisted fund has almost $9 billion and has been in existence since 1989 with average annual return of 9%.
It is important to note that there is an overlap between the major ASX indices. Companies in the ASX 20 which includes the largest 20 companies are also included in 100, 200 and 300 indexes. This is analogous to tree rings where as you extend out to wider indices, the weight of the largest companies gradually decreases.
High investment products can really make a large impact on the overall return of the portfolio in the long run. Vanguard is known to have some of the lowest cost funds listed on the ASX. Its whole philosophy is to provide a low cost market tracking fund for the everyday investor. The fund does not have a minimum investment which means it is accessible for everyone.
The annual management fee for Vanguard Australian Shares Index ETF is only 0.15%. This means the investor only pays 1.5 cents for every $100 dollar invested in the fund! It simply does not get cheaper than this.
VAS ASX Return Year to Date
There are very few index products that beat the annual cost of the VAS and even few that can match its long term return. From inception to 2016, the unlisted VAS share price has returned averaged 9% anually. Even with the ups and downs of the market. Investors in the managed fund and subsequently the ETF would capture 100% of the Australian share market return less the cost.
The key for long term investing is not timing the market but time in the market. Standard disclosure that past performance is not an indication of future performance and past dividend payment does not indicate future dividends from the fund.
Chart above shows the year to date return of the fund verses major global equity markets.
The dividend yield of VAS ETF fluctuates over time depending when the investor entered the fund. Since inception the dividend yield has averaged 4.5% per annum and is equivalent to the broader market yield around 4% to 5% which is paid quarterly.
Note that since most of the companies in the fund are Australian based, the dividend does come with franking credits.
The long term return of the fund is dependent on the companies growing earnings overtime as well as a function of increase payout of its earnings to shareholders.
All investments comes with risks and VAS ASX is no different. One issue we have to note with the fund is that although it is a Australia large cap index fund which holdings positions in 300 companies. Top 10 position in the fund accounts for more than 40% of the fund value.
Even though these are blue chip companies such as all big 4 banks such as NAB and CBA, miners like Rio Tinto and BHP as well as Telstra and Scentre Group (which owns Westfields in Australia). It is still relatively concentrated in financials and banks for our liking. Financials make up more than 40% of the fund along with miners (15%) means 60% of portfolio is just in 2 sectors.
VAS Distribution Dates 2017/2018
First Distribution Ex-Distribution Date: 3 Apr 2017
First Distribution Record Date: 4 Apr 2017
First Distribution Payment Date: 20 Apr 2017
Second Distribution Ex-Distribution Date: 3 Jul 2017
Second Distribution Record Date: 4 Jul 2017
Second Distribution Payment Date: 18 Jul 2017
Third Distribution Ex-Distribution Date: 2 Oct 2017
Third Distribution Record Date: 3 Oct 2017
Third Distribution Payment Date: 17 Oct 2017
Fourth Distribution Ex-Distribution Date: 2 Jan 2018
Fourth Distribution Record Date: 3 Jan 2018
Fourth Distribution Payment Date: 17 Jan 2018
ASX VAS is low fee index fund.